Financial mechanisms for mitigation and adaptation

and rural livelihoods under climate change in coming decades must necessarily focus on synergies between adaptation and mitigation strategies

Box 4 Examples of synergies in adaptation and mitigation [2]

Reducing methane emissions via integrated rice and livestock systems traditionally found in West Africa, India, Indonesia, and Vietnam, is a mitigation strategy that also results in better irrigation water efficiency—it can also provide new sources of income while improving performance of cultivated agro- ecosystems, and enhance human well-being.

Reducing N₂O emissions—can lead to improved groundwater quality and reduced loss of biodiversity as well as reducing costly production inputs.

Integrating animal manure waste management systems, including biogas capture and utilization, for reductions of CH₄and N₂O—could result in greater demand for farmyard manure and create income for the animal husbandry sector where many poor are engaged.

Methane emitted by ruminant livestock—represents energy lost to the animal that could otherwise be used to increase animal production. Modification of the quality and quantity of feed by having feeds that are not as badly affected by inclement climate conditions can result in lower methane emissions and increased production. In addition, increased efficiency of production from more climate adapted systems results in less methane per unit product—allowing growth in livestock production without equivalent growth in methane emissions [120]. Restoring land by controlled grazing—can lead to soil carbon sequestration, have positive impacts on livestock productivity, reduce desertification, and also provide social security to the poor during extreme events such as drought (especially in sub-Saharan Africa).

Practicing agro-forestry—can promote soil carbon sequestration while also improving agro-ecosystem function and resilience to climate extremes by enriching soil fertility and soil water retention.

Producing bio-energy—can lead to reduced greenhouse gas emissions via substitution of fossil fuels and generate income and employment for rural regions, providing an indirect but powerful adaptation strategy. However, experience with such schemes needs to be built around the world and the net impacts for a region as a whole need to be assessed on a case-by-case basis.

for the rural poor, in order to address the climate, environmental, social, and economic concerns expressed within both the UNFCCC and MDGs. In particular, a focus on agriculture, land use, land use change, and forestry in developing countries would offer the opportunity to address these issues from within the dominant economic sectors of most developing countries, strengthening their basis for sustainable development.

Recent work by FAO and the International Fund for Agricultural Development (IFAD) [118] indicate that there is scope for enhancing the ability of carbon markets to reach rural communities by strengthening the number of these project categories as well as widening their geographic distribution. Importantly, the economic potential of additional carbon sequestration activities—largely linked to reducing emissions from deforestation and degradation (REDD) and sustainable forest management actions, but also including agro-forestry techniques, soil conservation in agriculture, and renewable energy from biomass—is substantial, corresponding to 5–10 billion

tons of CO₂e per year by 2030 at carbon market prices ranging from 4 to 10

USD per ton CO₂e (IPCC AR4 WGIII). Annual financial flows from these

additional carbon sequestration activities could help meet the projected costs of adaptation to climate change in developing countries.

Many of these activities are currently allowed under a number of voluntary schemes and pilot funds, but are excluded under the CDM, the largest of the existing carbon markets. In particular, allowing credits from REDD, as well as from a range of agricultural and forestry activities, has the potential to greatly increase carbon flows to the rural poor in developing countries. Significant efforts should therefore be directed towards implementing enhanced land- based mechanisms for use within voluntary and post-2012 Kyoto carbon markets. In particular, the FAO is proposing “premium carbon crediting” mechanisms [118], designed to pay for projects that in addition to providing carbon offsets can, at the same time, result in system adaptation. In addition, the World Bank has given formal approval to the creation of the Climate Investment Funds (CIF), designed to provide funding to help developing countries in their efforts to mitigate rises in greenhouse gas emissions and adapt to climate change as elaborated in Box 5.

Box 5 The World Bank Climate Investment Funds (CIFs)

The World Bank has approved two trust funds to be created under the Climate Investment Funds, with total investments targeted to reach 5 billion USD. One of the funds, the Clean Technology Fund, will provide new, large-scale financial resources to invest in projects and programs in developing countries that contribute to the demonstration, deployment, and transfer of low-carbon technologies. The second fund, the Strategic Climate Fund, will serve as an overarching fund for various programs to test innovative approaches to climate change. The first such program is aimed at increasing climate resilience in developing countries. Clearly, the land use, land use change, agriculture, and forestry sectors are important areas where a number of projects could be tested under such funds.